The potential of magnetic nanoparticles (MNPs) in drug delivery systems (DDSs) is mainly related to its magnetic core and surface coating. These coatings can eliminate or minimize their aggregation under physiological conditions. Also, they can provide functional groups for bioconjugation to anticancer drugs and/or targeted ligands. Chitosan, as a derivative of chitin, is an attractive natural biopolymer from renewable resources with the presence of reactive amino and hydroxyl functional groups in its structure. Chitosan nanoparticles (NPs), due to their huge surface to volume ratio as compared to the chitosan in its bulk form, have outstanding physico-chemical, antimicrobial and biological properties. These unique properties make chitosan NPs a promising biopolymer for the application of DDSs. In this review, the current state and challenges for the application magnetic chitosan NPs in drug delivery systems were investigated. The present review also revisits the limitations and commercial impediments to provide insight for future works.